The Asian Development Bank (ADB) and Sanoat Qurilish Bank (SQB) have entered into a significant agreement by signing a $50m senior convertible loan to bolster Uzbekistan’s privatisation efforts of state-owned banks.

This strategic move is anticipated to fortify the banking sector, fostering economic growth and job creation. Noteworthy parallel lenders in this initiative include the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD).

The allocation of the loan proceeds is earmarked to support SQB in expanding its financial services to underserved micro, small, and medium-sized enterprises (MSMEs), with a particular focus on those owned or led by women (WMSMEs).

By diversifying its portfolio, SQB aims to transition into a fully universal commercial bank, extending its services to a broader customer segment. ADB is committed to providing technical assistance to SQB, facilitating the implementation of its transformation roadmap.

ADB private sector operations department director general Suzanne Gaboury said: “ADB fully supports the Government of Uzbekistan in its transformation to a vibrant and inclusive market economy and its implementation of banking sector reforms.

“This project will support the stability of the country’s banking system, capitalisation, and deposit levels while strengthening resilience and lending to climate projects and underserved MSMEs and WMSMEs.

“This project also provides the region with a strong business case for other countries seeking similar reforms.”

The backdrop of this collaboration lies in the Government of Uzbekistan’s market reform agenda initiated in 2017, which included the ambitious privatization of over 100 state-owned banks. The subsequent Strategy for Reforming the Banking Sector, covering the period 2020–2025, outlined key directions and objectives, placing a significant emphasis on the privatisation of six major state-owned banks.

ADB, alongside other multilateral development banks, has been actively supporting the ongoing privatisation process and broader banking sector reforms.

ADB Uzbekistan country director Kanokpan Lao-Araya said: “MSMEs continue to struggle to secure commercial financing to fund their growth, with women-owned being the most affected. ADB is supporting the enabling environment in Uzbekistan for MSMEs to have easier access to markets, as well as providing the much needed financing to close the financing gap for MSMEs.

“ADB’s partnership in SQB builds on those two objectives.”

Within Uzbekistan’s economy, MSMEs play a pivotal role, constituting the majority of registered businesses and employing 74% of the workforce. However, the challenge of accessing financing persists, with only 13% of the sector having commercial loan access.

Women-led businesses face an even more significant financing gap, estimated at $2.7bn, with loans to women-owned businesses comprising a mere 2.5% of total bank loans.

Established in 1922, SQB holds the distinction of being one of the oldest banks in Uzbekistan and stands as the second-largest state-owned bank. Renowned for its robust brand and leadership in the banking market, SQB boasts one of the most extensive branch networks in the country.